<<The first one is there is no evidence of a slowdown in demand for computers. >>
Some quotes from the article that you reference:
-----------------
'The low end has been performing better than expected. Intel have missed out on a growing market,'' Williams said.
But analysts said a general short-term inventory problem affecting computer manufacturers, and Intel's own failure to
address a market demand for cheaper computers, had led to an unjustified sell-off.
Lalloz said this problem was unlikely to occur again because manufacturers like COMPAQ Computer Corp (CPQ - news)
and International Business Machines Corp (IBM - news) were switching to ''build-to-order'' along the lines of hugely
successfull mail order seller Dell Computer Corp (DELL - news).
-------------------
Paul, you sound like a smart person. You have to be to have netted a 25%/year for the past 30 years! What do the above say about Dell's
prospects?
<<
The second problem in your position is one of valuation. Nobody has generated a
decent valuation model that takes growth into consideration.>>
I think its hard to quantify it at this stage of the game. Considering the
market saturation and competition in a fairly mature technology, I would
not tend to think that Dell's growth is sustainable over a period of
say 3-5 years.
I see that you have done some nice work:
Message 2718500
I would like to point out that even using your numbers("industry analysts"), at $7.91 eps it gives a PE of about 17 *WITHOUT* any discounting. And this is assuming that Dell's price stays at
$140/share for the next 3 years. I think most bulls on this thread presume that it will quadruple every year. Give me a break!
Please remember that the NASDAQ market multiple is roughly 22(considered
very high historically)!!!
Since the beta of Dell is about 4, we can discount it at:
4*(17 - 6) +6 = 50%(IBM selling at 17 times earning, assuming no growth for ibm), and 6% interest rate.
So if you discount the eps of 7.91 by 50%/annum what do we get? ;). OUCH!!!
Also $7.91 seems awfully high with so much competition and so much
market saturation. Oooops, I seem to be repeating myself here!
<<Had you bought
500 shares of MSFT the day before the October '87 crash you would be a
multimillionaire now!>>
I was in no danger of doing that since I was getting my hiney kicked
in grad school. Also, dell ain;t no msft!
Here's an excerpt from WSJ:
interactive.wsj.com
ntel has reorganized to focus on the low-end market. But Nathan
Brookwood, an analyst at Dataquest, said software applications have
stagnated so that even the fastest computers offer little benefit to the speed
of many mainstream applications. He also noted that sub-$1,000 computers
are causing "price compression," or a cascading effect on the prices of other
PCs, where PC makers must also lower prices on other computers, such as
cutting a $2,000 computer to $1,500. |
